The reform of dismissal rules in Belgium

Transcription

1 The reform of dismissal rules in Belgium 2014

2 2 The reform of dismissal rules in Belgium 2014 The reform of dismissal rules in Belgium On 1 January this year, new dismissal rules came into force. Following a judgment of the Constitutional Court, the distinction between blue-collar and white-collar employees in terms of notice periods and the first day of sick leave for blue-collar employees (carenzdag/jour de carence) had to be eliminated. The result of this harmonisation exercise is the Law of 26 December 2013 concerning the introduction of a unified status for blue-collar and white-collar employees with regard to notice periods and the first day of sick leave and accompanying measures (the LUS ). The LUS introduces new dismissal rules both for bluecollar and white-collar employees. Subsequently, the social partners have concluded a CLA within the National Council of Labour regarding the duty to give reasons for dismissal ( CLA n 109 ). The new rules will undoubtedly have a significant impact on your HR policy. This publication provides an explanation of the most important new elements introduced by the LUS and CLA n 109 concerning the termination of employment agreements. We provide you with an overview of the new notice periods, and also of the wider reform and modernisation of the dismissal regulations. This publication does not address the special rules applicable to agreements for students, servants, home workers, programmes of re-employment and the execution of temporary labour and temporary agency work. The limited context of this publication similarly does not allow us to touch upon extraordinary situations such as, for example, the position of an employee whose blue-collar status has changed to white-collar status after 1 January This publication is based on the regulations in force as at 1 March Allen & Overy LLP 2014

3 3 Table of content 1. Terminology 4 2. Overview 5 3. Notice periods Basic terms Exceptional Sectors Special terms Retirement SUC Temporary unemployment Possibility to deviate Entry into force Employment agreement commenced before 1 January Basic rule: 2-step-calculation Termination of employment by the employer Resignation by the employee Exceptional Sectors Special terms Special situations On-going trial period Deviating clause for blue-collar employees with less than 6 months service Collective dismissal Start of notice period Length of service Compensation in lieu of notice (calculation basis) Fixed-term employment agreement or agreement for clearly-defined project Agreement entered into before 1 January Agreement entered into on or after 1 January Dismissal in the event of incapacity to work Incapacity to work after notice of termination has been given Incapacity to work and fixed-term agreements or agreements for a clearly-defined project Trial period clause Outplacement Measures designed to increase employability Leave to search for new job The duty to give reasons for dismissal and arbitrary dismissal Re-activation compensation Compensatory measures Dismissal compensation payment and dismissal allowance Additional allowances at industry level Special compensatory contribution on compensation in lieu of notice The provision for social liabilities tax exemption Contact persons 71

4 4 The reform of dismissal rules in Belgium Terminology CIT: The code on Income Tax. CLA: A collective labour agreement. CLA n 75: Collective labour agreement n 75 of 20 December 1999 regarding the notice periods of blue-collar employees. CLA n 82: Collective labour agreement n 82 of 10 July 2002 regarding outplacement for employees aged 45 and older that are being dismissed. CLA n 109: Collective labour agreement n 109 of 12 February 2014 regarding the duty to give reasons for dismissal. Closure Fund: The fund for the remuneration of dismissed employees in the event of a closure of an undertaking. Decretal Law: The decretal law of 28 December 1944 regarding the social security of blue-collar employees. EE: The employee. ER: The employer. Exceptional Sector: A sector in which on 31 December 2013 notice periods were determined through a royal decree (on the basis of article 61 or 65/3, 2 of the Law on Employment Agreements) that were shorter than the notice periods that are specified in article 70, 2 of the LUS. FPS ELSD: The Federal Public Service for Employment, Labour and Social Dialogue. IPA Law: The law of 12 April 2011 regarding the amendment of the law of 1 February 2011 regarding the extension of the crisis measures and the implementation of the inter-professional agreement, and implementing the compromise of the Government regarding the draft inter-professional agreement. Law on Employment Agreements: The law of 3 July 1978 regarding employment agreements. Law on General Principles of Social Security: The law of 29 June 1981 regarding the general principles of social security for employees. Law on Outplacement: The law of 5 September 2001 for the improvement of the employment rate of employees. Law on Temporary Agency Work: The law of 24 July 1987 regarding temporary labour, temporary agency work and the putting at the disposal of users of employees. Law on the Generation Pact: The law of 23 December 2005 regarding the generation pact. LUS: The law of 26 December 2013 regarding the introduction of a unified status for blue-collar and white-collar employees with regard to notice periods and the first day of sick leave and accompanying measures. NEO: National Employment Office (Rijksdienst voor Arbeidsvoorziening/Office national de l emploi). RD on Dismissal Compensation Payment: The Royal Decree of 9 January 2014 regarding the dismissal compensation payment. RD on Unemployment: The Royal Decree of 25 November 1991 regarding unemployment regulations. Reference Period: The first half of the agreed duration of the employment agreement for a fixed term or for a clearly-defined project, subject to a maximum of 6 months. Renault Law: The law of 13 February 1998 regarding provisions for the improvement of employment. SUC: The system of unemployment with company payment (Stelsel van werkloosheid met bedrijfstoeslag/régime de chômage avec complément d entreprise). Allen & Overy LLP 2014

5 5 2. Overview The most important changes surrounding the termination of employment agreements are: The rules regarding the termination of employment agreements of indefinite duration whose performance commenced on or after 1 January 2014 (these are covered in section 3); The rules regarding the termination of employment agreements of indefinite duration whose performance commenced before 1 January 2014 (these are covered in section 4); and The rules regarding the termination of employment agreements of fixed duration or for a clearly defined project (these are covered in section 8). In addition to these rules regarding notice periods, we also provide an overview of other relevant changes in connection with the termination of employment agreements, including regarding the start of the notice period, the concept of length of service, trial period clause, outplacement, leave to search for a new job, the duty to give reasons for dismissal and arbitrary dismissal, compensation measures, etc. These are covered in sections 5 to 7, and from section 9 onwards. performance of employment agreement started 1/1/2014 See flowcharts on pages 8, 11 and 13 Employment agreement of indefinite duration performance of employment agreement started < 1/1/2014 See flowcharts on pages 20, 25, 28 and 29 Fixed-term employment agreement or agreement for a clearly-defined project See flowchart on page 39

6 6 The reform of dismissal rules in Belgium 2014 Allen & Overy LLP 2014

7 7 3. Notice periods The LUS has introduced fixed notice periods, both for termination of employment by the employer as well as for resignations by the employee. Henceforth, an employee s length of service is the only criterion to be taken into account in determining the duration of the notice period. Basic terms The notice periods included in the Law on Employment Agreements will be defined in section 3.1. Hereafter, we will refer to these terms as the basic terms. Exceptional Sectors In addition to these basic terms, there are also exceptional terms for certain sectors (the Exceptional Sectors). These will be explained in section 3.2. Special terms Finally, there are special terms that apply in the event of termination of employment due to certain specific reasons or in the case of certain circumstances. These will be discussed further in section Basic terms NOTICE GIVEN BY THE EMPLOYER The notice periods are fixed terms which apply to both blue-collar and white-collar employees, the duration of which is determined solely on the basis of the employee s length of service. The terms are gradually established, in different phases, but with a decreasing augmentation as the employee s length of service increases. Henceforth, the fixed terms will be expressed in weeks. See table on page 8. Art. 37/2, 1 Law on Employment Agreements NOTICE GIVEN BY THE EMPLOYEE In the event that notice is given by the employee, the applicable notice period equals half of the notice period that must be taken into account if notice were given by the employer (rounded off to the lower whole number), subject to a maximum of 13 weeks. See table on page 8. Art. 37/2, 2 Law on Employment Agreements COUNTER NOTICE An employee who has been served notice by their employer but then finds another job can terminate the agreement with a reduced notice period. The terms of the counter notice are the same as the terms that apply in the event of notice being given by the employee, however subject to a maximum of 4 weeks. See table on page 8. Art. 37/2, 3 Law on Employment Agreements

8 8 The reform of dismissal rules in Belgium 2014 If the basic terms must be applied, the terms are as stated below, unless a more beneficial regime (for the EE) exists at a company or individual level. Length of service Notice period in the event of termination by ER Notice period in the event of resignation by EE From 0 to less than 3 months 2 weeks 1 week 1 week From 3 to less than 6 months 4 weeks 2 weeks 2 weeks From 6 to less than 9 months 6 weeks 3 weeks 3 weeks From 9 to less than 12 months 7 weeks 3 weeks 3 weeks From 12 to less than 15 months 8 weeks 4 weeks 4 weeks From 15 to less than 18 months 9 weeks 4 weeks 4 weeks From 18 to less than 21 months 10 weeks 5 weeks 4 weeks From 21 to less than 24 months 11 weeks 5 weeks 4 weeks From 2 years to less than 3 years 12 weeks 6 weeks 4 weeks From 3 years to less than 4 years 13 weeks 6 weeks 4 weeks From 4 years to less than 5 years 15 weeks 7 weeks 4 weeks From 5 years to less than 6 years 18 weeks 9 weeks 4 weeks From 6 years to less than 7 years 21 weeks 10 weeks 4 weeks From 7 years to less than 8 years 24 weeks 12 weeks 4 weeks From 8 years to less than 9 years 27 weeks 13 weeks 4 weeks From 9 years to less than 10 years 30 weeks 13 weeks 4 weeks From 10 years to less than 11 years 33 weeks 13 weeks 4 weeks From 11 years to less than 12 years 36 weeks 13 weeks 4 weeks From 12 years to less than 13 years 39 weeks 13 weeks 4 weeks From 13 years to less than 14 years 42 weeks 13 weeks 4 weeks From 14 years to less than 15 years 45 weeks 13 weeks 4 weeks From 15 years to less than 16 years 48 weeks 13 weeks 4 weeks From 16 years to less than 17 years 51 weeks 13 weeks 4 weeks From 17 years to less than 18 years 54 weeks 13 weeks 4 weeks From 18 years to less than 19 years 57 weeks 13 weeks 4 weeks From 19 years to less than 20 years 60 weeks 13 weeks 4 weeks From 20 years to less than 21 years 62 weeks 13 weeks 4 weeks From 21 years to less than 22 years 63 weeks 13 weeks 4 weeks From 22 years to less than 23 years 64 weeks 13 weeks 4 weeks From 23 years to less than 24 years 65 weeks 13 weeks 4 weeks From 24 years to less than 25 years 66 weeks 13 weeks 4 weeks From 25 years to less than 26 years 67 weeks 13 weeks 4 weeks From 26 years to less than 27 years 68 weeks 13 weeks 4 weeks From 27 years to less than 28 years 69 weeks 13 weeks 4 weeks From 28 years to less than 29 years 70 weeks 13 weeks 4 weeks From 29 years to less than 30 years 71 weeks 13 weeks 4 weeks Etc (+ 1 year) Etc (+ 1 week) 13 weeks 4 weeks Notice period if counter notice is given by EE Allen & Overy LLP 2014

9 9 3.2 Exceptional sectors SHORTER NOTICE PERIODS FOR BLUE-COLLAR EMPLOYEES IN CERTAIN SECTORS In certain sectors, blue-collar employees do not fall under the basic terms previously referred to. For those blue-collar employees, different (shorter) notice periods apply. For some blue-collar employees, this exception only applies temporarily (temporary exception); for others the exception applies permanently (structural exception). SECTORS INVOLVED The sectors in which these exceptional terms apply are those sectors in which, as at 31 December 2013, use had been made of the option to fix shorter notice periods for blue-collar employees via a royal decree (on the basis of article 61 or 65/3, 2 of the Law on Employment Agreements) which are shorter than the notice periods that are determined in article 70, 2 of the LUS (which largely correspond with the notice periods determined in CLA n 75 see table on page 11). In practical terms, this means that in those sectors in which on 31 December 2013 the applicable notice periods were shorter than the periods determined in the table on page 11, the notice periods set out in the table will apply as from 1 January Those sectors in which a royal decree only fixed shorter notice periods for blue-collar employees with a maximum of 1 year s service, or for employees that were dismissed in the context of a restructuring, retirement or SUC, do not fall under the exceptional regime. According to the FPS ELSD, this affects the following sectors * : JC n 109 (Clothing and tailoring industry) JC n 124 (Construction industry) JC n 126 (Upholstery and woodworking) JC n (Tannery and trade in raw skins) JC n (Footwear, bootmakers and custom workers) JC n (Ground handling at airports ) JC n (Recovery of rags) JC n 147 (Weapons forged by hand) JC n (Port of Antwerp) JC n 311 (Large retail stores) JC n 324 (Diamond industry and trade) JC n 330 (Health establishments and services Dental prostheses) * The NEO also includes the following sectors: JC n 111 Metal-, machine and electrical construction East- and West-Flanders and JC n 111 Metal-, machine and electrical construction for the employees who are ususally employed in workplaces outside the company s registered office and who, with appropriate building materials, assemble bridges and metal trusses, and perform works of heavy kettle building works with the same features.

10 10 The reform of dismissal rules in Belgium 2014 ASSESSMENT AT THE SECTOR OR INDIVIDUAL LEVEL? According to the FPS ELSD, the comparison of notice periods (ie between the notice periods that were applicable on 31 December 2013 and those fixed in article 70, 2 LUS) in order to determine who falls under the (shorter) exceptional terms must be made for each employee individually. This would imply that not necessarily all blue-collar employees of the joint committees previously referred to would be subject to the shorter notice periods. In some sectors there are, for example, notice periods that are shorter than the terms of article 70, 2 LUS, but only for employees with certain periods of service. However, this interpretation is not in line with the preparatory works, which give the impression that the applicability of the exceptional regime ought to be determined at the sector level. It remains to be seen how the courts will assess this. TEMPORARY EXCEPTION UNTIL 31 DECEMBER 2017 In the sectors concerned, the shorter terms will apply to any notice given (whether by the employer or the employee) between 1 January 2014 and 31 December Hence, as from 1 January 2018, the basic terms will apply (unless the notice concerns an employee that falls under the structural exception). However, the sectors can decide to evolve faster towards adopting the basic terms via a CLA. Art. 70, 1 and 3 LUS STRUCTURAL EXCEPTION FOR CERTAIN BLUE- COLLAR EMPLOYEES For certain blue-collar employees employed in the sectors concerned, the exceptional shorter terms will also remain applicable after 31 December More specifically, those affected are employees without a fixed place of employment that usually perform one or more of the following activities in temporary and mobile workplaces * : excavation works, earthworks, foundation and reinforcement works, water-engineering works, road works, agricultural works, placement of utility pipes, construction, assembly and disassembly of in particular prefabricated elements, beams and columns, furnishing or equipment works, dismantling works, demolition works, preservation works, maintenance works, painting and purification works, cleaning or reorganisation works, or finishing operations associated with one or more of the works listed. The FPS ELSD indicates that this concerns certain employees of joint committee n 124 (Construction industry) and of joint committee n 126 (Upholstery and woodworking). Art. 70, 4 LUS * The Dutch version of the LUS refers to temporary and mobile workplaces ( tijdelijke en mobiele werkplaatsen ), whilst the French version refers to temporary or mobile workplaces ( des lieux de travail temporaires ou mobiles ). Allen & Overy LLP 2014

11 11 SHORTER NOTICE PERIODS The (shorter) notice periods that have to be applied if the temporary exception or structural exception applies are as follows: If the special terms for the Exceptional Sectors must be applied, these are the terms mentioned here, unless a more beneficial regime (for the EE) exists at the sector, company or individual level. Length of service Notice period in event of termination by ER From 0 to less than 3 months 2 weeks 1 week From 3 to less than 6 months 4 weeks 2 weeks From 6 months to less than 5 years 5 weeks 2 weeks From 5 years to less than 10 years 6 weeks 3 weeks From 10 years to less than 15 years 8 weeks 4 weeks From 15 years to less than 20 years 12 weeks 6 weeks Minimum 20 years 16 weeks 8 weeks Notice period in event of resignation by EE JUSTIFICATION FOR TEMPORARY EXCEPTION The temporary exception is justified for the sectors concerned by the fact that an immediate switch to the new notice periods could potentially seriously disrupt employment in those sectors. JUSTIFICATION FOR STRUCTURAL EXCEPTION According to the preparatory works, the structural exception for certain blue-collar employees is compensated for by the shortage of employees in the sectors concerned and justified by the goal of maintaining the social protection of those employees. At the moment, those employees generally have an employment agreement of indefinite duration, despite the temporary nature of their activities and an extension of the notice periods would cause the use of indefinite duration contracts to be replaced, on a large scale, by forms of temporary employment.

12 12 The reform of dismissal rules in Belgium Special terms Finally, there are special rules that apply in the event of termination of employment with a view to retirement, an SUC or during a period of temporary unemployment Retirement MAXIMUM 26 WEEKS NOTICE If notice is given to an employee in order to terminate the employment agreement as from the first day following the month in which the employee attains the statutory pension age (currently 65 years old), the basic terms apply (see section 3.1), subject to a maximum notice period of 26 weeks. Art. 37/6 Law on Employment Agreements SUC MINIMUM 26 WEEKS NOTICE If notice is given to an employee in order to allow the employee to benefit from the system of unemployment with company payment (SUC), the basic terms can be reduced, but subject to a minimum notice period of 26 weeks. This is, however, only possible if the employer is recognised as a company in restructuring or financial difficulty. The further rules and conditions of this possibility must be determined by royal decree. Art. 37/11 Law on Employment Agreements Temporary unemployment EMPLOYEE CAN TERMINATE AGREEMENT WITHOUT NOTICE During any period of full suspension of the employment agreement or partial employment in the event of economic unemployment or bad weather, the employee is entitled to terminate the employment agreement without notice. If the suspension is due to bad weather, this is only possible if the suspension lasts for more than 1 month. EMPLOYEE AND EMPLOYER CAN GIVE NOTICE In addition, the law clarifies that the employer and the employee are both entitled to give notice to terminate the employment agreement during a suspension caused by economic unemployment or bad weather. If notice is served by the employee before or during the suspension, the notice period continues to run during the period of suspension. If notice is served by the employer in this manner, the notice period stops running during the period of suspension. Art. 37/7 Law on Employment Agreements It is not possible to determine more beneficial notice periods for employees at the sector level. This is however possible at the company or individual level. Allen & Overy LLP 2014

13 13 SPECIAL TERMS UNIFIED STATUS - OVERVIEW Termination with a view to retirement Basic terms (see flowchart on page 8) (*), but maximum of 26 weeks notice if termination by ER Termination with a view to SUC Basic terms (see flowchart on page 8) (*), but can be reduced to a minimum of 26 weeks notice if ER = a company in restructuring or financial difficulty Termination during temporary unemployment Basic terms (see flowchart on page 8) (*), but EE can terminate without notice period or payment in lieu of notice if suspension is due to (i) bad weather 1 month or (ii) lack of work for economic reasons Termination by ER who is part of an Exceptional Sector + EE is blue-collar EE EE does not have fixed place of employment and performs specific tasks at a temporary and mobile workplace Exceptional terms (see flowchart on page 11) (**) Termination in the event of incapacity to work Other EE Notice 31/12/2017 Notice 1/1/2018 Exceptional terms (see flowchart on page 11) (**) Basic terms (see flowchart on page 8) (*) (*) or a more beneficial regime (for EE) at the individual or company level (**) or a more beneficial regime (for EE) at the individual, company or sector level See flowchart on page Possibility to deviate NO DEVIATION AT THE SECTOR LEVEL It is not possible to deviate from the statutory notice periods (whether for termination of employment by the employer or by the employee) by entering into a sector CLA. Hence, the sectors cannot provide more beneficial notice periods. Art. 37/3 Law on Employment Agreements DEVIATION IS POSSIBLE AT THE COMPANY AND INDIVIDUAL LEVEL More beneficial notice periods for the employee can, however, be provided at the company or individual level. 3.5 Entry into force 1 JANUARI 2014 The notice periods discussed in this section 3 apply to any termination of employment that is notified as from 1 January By contrast, any termination of employment that was notified before 1 January 2014 retains its effects under the former rules. Art. 110 and 111 LUS TRANSITIONAL REGIME However, there is a transitional regime for any termination of employment that is notified on or after 1 January 2014 but that concerns an employment agreement whose performance commenced before 1 January The notice periods that apply in this case are discussed further in section 4.

14 14 The reform of dismissal rules in Belgium 2014 Allen & Overy LLP 2014

15 15 4. Employment agreement commenced before 1 January 2014 For dismissals carried out as from 1 January 2014 that relate to employees with an employment agreement (of indefinite duration), the performance of which commenced before 1 January 2014, the rules that are explained in this section 4 must be applied. Basic rule In the event of the dismissal of an employee whose employment agreement commenced before 1 January 2014, the notice period must be determined in accordance with a 2-step-calculation, as further explained in section 4.1. Exceptional sectors Notwithstanding this, there are exceptional rules for (certain) blue-collar employees employed in the so-called Exceptional Sectors, as discussed in section 4.2. Special terms Furthermore, there are special terms that apply in the event of termination of employment due to certain specified reasons or in the event of certain circumstances. These are further explained in section 4.3. Specific transitional rules Finally, there are specific transitional rules for on-going trial period clauses, for blue-collar employees with less than 6 months service and for collective dismissals for which a social plan was agreed upon before These are explained in section 4.4.

16 16 The reform of dismissal rules in Belgium Basic rule: 2-step-calculation T ermination of employment by the employer FIXED POINT SYSTEM To accommodate the legitimate expectations of those parties whose employment agreement commenced before 2014, the legislator has provided a fixed point system which takes into account the rights that were accrued under the old rules. CALCULATION IN 2 STEPS Accordingly, the calculation of the notice period is done in 2 steps: the first step concerns service already accrued as at 31 December 2013; the second step concerns service accrued as from 1 January In principle, the final notice period is the result of the sum of the notice periods resulting from step 1 and 2. Art. 67 LUS Step 1: ACCRUED SERVICE AS AT 31 DECEMBER 2013 PRINCIPLE: SNAPSHOT AS AT 31 DECEMBER 2013 In the first step, the notice period is calculated on the basis of service accrued as at 31 December In principle, this notice period has to be calculated in accordance with the statutory, regulatory and contractual rules that were in force on 31 December So it is as if a snapshot is taken on 31 December 2013 of the employee s acquired rights. Consequently, it is important to take a snapshot for each employee of their (i) status (blue-collar/white-collar employee), (ii) length of service and (iii) remuneration package as at 31 December Subsequently, in the event of a possible termination, all these elements will be determinative for the calculation of the first part of the notice period. Whenever a white-collar employee with a remuneration package around the threshold between lower/higher earning white-collar employees (ie 32,254) is involved, it is important for the employer to thoroughly document the remuneration package as it existed on 31 December 2013, in order to avoid future discussions as to which category the affected employee fell under on 31 December For employees who started before 1 January 2014, the notice period is calculated in 2 steps: a first step is based on their accrued service as at 31 December 2013 and a second step based on their service as from 1 January Allen & Overy LLP 2014

17 17 SNAPSHOT BASED ON THE RULES APPLICABLE ON 31 DECEMBER 2013 The first part of the notice period is, as mentioned, determined in accordance with the statutory, regulatory and contractual rules that were applicable on 31 December In practice this means the following: For blue-collar employees whose employment agreement commenced before 1 January 2012, these are the statutory notice periods set out in article 59 of the Law on Employment Agreements or an exception from these notice periods that existed on 31 December 2013 (on the basis of article 61 of the Law on Employment Agreements), or a regime that is more beneficial (for the employee) which existed on 31 December 2013 at the sector, company or individual level. For blue-collar employees whose employment agreement commenced on or after 1 January 2012, these are the statutory IPA notice periods set out in article 65/2 of the Law on Employment Agreements or an exception to these notice periods that existed on 31 December 2013 (on the basis of article 65/3 of the Law on Employment Agreements), unless a more beneficial regime (in respect of the employee) existed on 31 December 2013 at the sector, company or individual level. For lower earning white-collar employees (ie white-collar employees whose annual salary was equal to or lower than 32,254 on 31 December 2013), these are the statutory minimum periods, in other words 3 months per commenced 5-year period of service, unless a more beneficial regime (for the employee) existed on 31 December 2013 at the sector, company or individual level. EXCEPTION FOR HIGHER EARNING WHITE- COLLAR EMPLOYEES For higher earning white-collar employees, there is an exceptional rule. Higher earning white-collar employees are white-collar employees whose annual salary was higher than 32,254 on 31 December For them, the first part of the notice period is fixed. This is because the rules that were in force on 31 December 2013 referred to a notice period that was to be fixed by the parties by agreement or by the judge. LUMP SUM: 1 MONTH PER YEAR S SERVICE More specifically, the first part of the notice period for higher earning white-collar employees, in case of termination of employment by the employer, is 1 month per commenced year of service, subject to a minimum of 3 months. Because of this rule, the Claeys formula and other calculation formulas are now no longer relevant. If on 31 December 2013 a regulation existed at the sector, company or individual level that is more beneficial (for the employee) than the aforementioned rule of 1 month per commenced year of service subject to a minimum of 3 months, that more beneficial regulation must be taken into account. Art. 68 LUS In the first step, a snapshot is taken based on the rules that applied on 31 December 2013, albeit with some exceptions.

18 18 The reform of dismissal rules in Belgium 2014 AMBIGUITY IN THE EVENT OF A SPECIFIC REASON FOR DISMISSAL OR ONGOING TRIAL PERIOD ON 31 DECEMBER 2013 One of the main areas of ambiguity in the LUS is the question of which notice period must be applied during the first step if there is a specific reason for the dismissal. Do the general notice periods always have to be applied during the first step or do the specific notice periods have to be taken into account in the event of termination because of a specific reason? For example, it is not clear how the snapshot should be taken in the following situations: Dismissal with a view to SUC: In determining the first step in the event of a dismissal with a view to SUC, does one have to take into account any reduced notice periods that may have been provided at the sector level on 31 December 2013? Dismissal in the context of a restructuring: For the determination of the first step in the event of a dismissal in the context of a restructuring, do the general notice periods need to be taken into account or any exceptional terms that may have been provided at sector or company level on 31 December 2013? A similar question arises if a trial period was running on 31 December If the white-collar employee is dismissed after the end of the term of the trial period and their dismissal rights consequently need to be determined on the basis of the 2-step-calculation, how does the first step need to be completed? Does one need to take into account the general notice period that applied to the affected employee on 31 December 2013, or rather the reduced notice period that applied to a dismissal during the trial period? In any event, it would be useful if the legislator addressed this. WHAT ABOUT TERMINATION CLAUSES? Based on a literal reading of the LUS, the rule of 1 month per commenced year of service subject to a minimum of 3 months also applies to those higher earning white-collar employees whose employment agreement contains a valid termination clause (in which the notice period was agreed upon on the basis of article 82, 5 of the Law on Employment Agreements). On this issue, the Council of State noted the objection that this detracts from the acquired rights of those employees. Nevertheless, it appears from the preparatory works (as amended after the advice of the Council of State) that it is still the legislator s intention to enforce validly concluded termination clauses. In this sense, the preparatory works state that one must take into account the legitimate expectations of the parties whose employment agreement was entered into and performed before 1 January A legitimate expectation entails, according to the preparatory works, that clauses agreed upon will be respected. Hence, the conclusion in the preparatory works is that all valid clauses existing on 31 December 2013 will remain unchanged and that the rights for past service will be determined on the basis of these clauses. Elsewhere in the preparatory works it can be read that, following the Council of State s advice, it was decided that those agreements that are in force on 31 December 2013 will remain in force, irrespective of whether the notice period determined in the agreement is more or less beneficial than the one under the new statutory regulation. However, the text of the LUS was not amended in this respect. Therefore, it remains to be seen which position the labour courts will follow. Allen & Overy LLP 2014

19 19 Step 2: SERVICE ACCRUED AS FROM 1 JANUARY 2014 COUNTER RESET TO ZERO IIn the second step, the second part of the notice period is calculated in accordance with the service that is accrued as from 1 January For the calculation of the second part of the notice period, the service counter is reset to zero and starts running again on 1 January APPLY BASIC TERMS The second part of the notice period has to be calculated in accordance with the statutory or regulatory rules that are in force at the moment notice of termination is given. Consequently, the new notice periods referred to in section 3.1 (ie the basic terms) have to be applied to the service accrued as from 1 January It must be assumed that if there is a more beneficial regulation (for the employee) at the company or individual level, those more beneficial terms count rather than the basic terms. Art. 69 LUS Below, we give a couple of examples in which the 2-stepcalculation has been applied to a specific case. EXAMPLE 1 Performance of the employment agreement of a white-collar employee whose remuneration was not higher than 32,254 on 31 December 2013 commenced on 1 July The employer gives notice of termination in September On 31 December 2013 the white-collar employee was in his 4th year of service with this employer. If he were to have been dismissed at that moment, he would have been entitled to 3 months notice, in accordance with article 82, 2 of the Law on Employment Agreements. The first part of his notice period is accordingly 3 months. As from 1 January 2014, a new period of service started running. Consequently, at the time of his dismissal in September 2016, the white-collar employee will be in his 3rd year of service, counting as from the introduction of the new dismissal rules. Based on the new rules regarding notice periods, the second part of his notice period equals 12 weeks. When dismissing this employee in September 2016, the employer consequently must observe a (total) notice period of 3 months plus 12 weeks.

20 20 The reform of dismissal rules in Belgium 2014 In the second step the service counter is reset to zero on 1 January 2014 and the new terms are henceforth applied. EXAMPLE 2 A blue-collar employee whose employer falls under joint committee n 116 for the chemistry industry has been employed since 1 January 2010 and will be dismissed by his employer in November On 31 December 2013 the blue-collar employee was in his 4th year of service with this employer. The first part of his notice period equals 42 days in accordance with the royal decree of 26 January 2010 that, on the basis of article 61 of the Law on Employment Agreements, regulates the notice periods of blue-collar employees in the chemistry industry. As from 1 January 2014, a new period of service started running. At the moment of his dismissal in November 2017, the employee is in his 4th year of service, counting as from the introduction of the new dismissal rules. On the basis of the new rules regarding notice periods, the second part of his notice period equals 13 weeks. When dismissing this employee in November 2017, the employer must observe a (total) notice period of 42 days plus 13 weeks, or 19 weeks in total. AGREEMENT STARTED < 1/1/2014 TERMINATION OF EMPLOYMENT BY ER BASIC RULES Concerning service < 1/1/2014 Concerning service 1/1/2014 Blue-collar EE Employment agreement started < 1/1/2012 Employment agreement started 1/1/2012 Terms as at 31/12/2013 (*) OR a more beneficial regime (for EE) individual company sector IPA terms as at 31/12/2013 (**) OR a more beneficial regime (for EE) individual company sector Basic terms under unified status (see table on page 8) OR a more beneficial regime (for EE) individual company Basic terms under unified status (see table on page 8) OR a more beneficial regime (for EE) individual company White-collar EE Lower earning white-collar EE ( 32,254 on 31/12/2013) Higher earning white-collar EE (> 32,254 on 31/12/2013) 3 months/5-year period of commenced service OR a more beneficial regime (for EE) individual company sector 1 month/commenced year of service subject to a minimum of 3 months (***) OR a more beneficial regime (for EE) individual company sector Basic terms under unified status (see table on page 8) OR a more beneficial regime (for EE) individual company Basic terms under unified status (see table on page 8) (***) OR a more beneficial regime (for EE) individual company Specific reason Possible application of maximum/reduction if dismissal with a view to retirement or SUC (see flowchart on page 13) (*) art. 59 Law on Employment Agreements or existing deviation on 31/12/2013 (**) art. 65/2 Law on Employment Agreements or existing deviation on 31/12/2013 (***) Issue contractual clause on the basis of art Law on Employment Agreements Allen & Overy LLP 2014

21 Resignation by the employee To determine the notice period that has to be observed by the employee, the 2-step-calculation must also be applied. Step 1: ACCRUED SERVICE AS AT 31 DECEMBER 2013 PRINCIPLE: SNAPSHOT AS AT 31 DECEMBER 2013 In the first step, the notice period is calculated on the basis of the service accrued as at 31 December SNAPSHOT BASED ON THE RULES APPLICABLE ON 31 DECEMBER 2013 The first part of the notice period is, in principle, determined in accordance with the statutory, regulatory and contractual rules that were applicable on 31 December In practice this means the following: For blue-collar employees whose employment agreement commenced before 1 January 2012 these are the statutory notice periods of article 59 of the Law on Employment Agreements or an exception from these notice periods that existed on 31 December 2013 (on the basis of article 61 of the Law on Employment Agreements), or a regime that is more beneficial (for the employee) which existed on 31 December 2013 at the sector, company or individual level. For blue-collar employees whose employment agreement commenced on or after 1 January 2012 these are the statutory IPA notice periods set out in article 65/2 of the Law on Employment Agreements or an exception to these notice periods that existed on 31 December 2013 (on the basis of article 65/3 of the Law on Employment Agreements), unless a more beneficial regime (for the employee) existed on 31 December 2013 at the sector, company or individual level. For lower earning white-collar employees (ie white-collar employees whose annual salary was equal to or lower than 32,254 on 31 December 2013), these are the statutory periods set out in article 82, 2 of the Law on Employment Agreements in other words 1.5 months per commenced 5-year period of service, subject to a maximum of 3 months unless a more beneficial regime (for the employee) existed on 31 December 2013 at the sector, company or individual level. EXCEPTION FOR HIGHER EARNING WHITE- COLLAR EMPLOYEES For higher earning white-collar employees, there is an exceptional rule (just as there is in the case of a dismissal by the employer). Higher earning white-collar employees are white-collar employees whose annual salary was higher than 32,254 on 31 December For those employees, the first part of the notice period is fixed. More specifically, the first part of the notice period, in the event of termination of the agreement by the employee, is: 1.5 months per commenced 5-year period of service, subject to a maximum of 4.5 months for a white-collar employee whose annual salary is not higher than 64,508; and 1.5 months per commenced 5-year period of service, subject to a maximum of 6 months for a white-collar employee whose annual salary is higher than 64,508. Although this is less relevant in practice, for completeness we note that if a regulation existed on 31 December 2013 at the sector, company or individual level that was more beneficial for the employee than these rules of 1.5 months notice per 5-year period of service, subject to a maximum of 4.5 or 6 months respectively, those more beneficial regulations must be taken into account. Art. 68 LUS

22 22 The reform of dismissal rules in Belgium 2014 Step 2: SERVICE ACCRUED AS FROM 1 JANUARY 2014 COUNTER RESET TO ZERO In the second step just as in the event of termination of employment by the employer the second part of the notice period is calculated taking into account service that is accrued as from 1 January APPLY BASIC TERMS The second part of the notice period has to be calculated in accordance with the statutory or regulatory rules that are in force at the moment notice of termination is given. Consequently, the new notice periods referred to in section 3.1 (ie the basic terms) must be applied to the service accrued as from 1 January For completeness, we also note here that, if there is a more beneficial regulation (for the employee) at the company or individual level, those more beneficial terms must be taken into account rather than the basic terms. EXCEPTION: APPLY MAXIMA In the event of termination of employment by the employee, there are 2 limitations to the 2-step-calculation: Firstly, the second step of the calculation does not have to be applied whenever the maxima from the first step (namely 3, 4.5 or 6 months respectively) have already been attained on 31 December In that case, the maxima from the first step are applicable and the notice period is not extended on the basis of the service accrued as from 1 January In addition, there is an absolute maximum which applies if the maxima from the first step (namely 3, 4.5 or 6 months respectively) have not been attained on 31 December 2013 and the second step of the calculation must consequently be applied. In that case, the total notice period (ie the sum of the first step and the second step) cannot exceed 13 weeks. This cap of 13 weeks does not apply if the maxima of the first step have already been attained. If the notice period that is to be respected by the employee based on the first step amounts up to 4.5 or 6 months, that notice period will not be decreased to 13 weeks. The FPS ELSD adds a third situation in their commentary * on the LUS, namely if the employee has not attained the maxima from the first step but the notice period to which he or she is entitled equals or is higher than 13 weeks. According to the FPS ELSD, in that case the second step does not have to be applied and only the notice period that follows from the first step has to be applied. The wording of the LUS however does not make this distinction and states that if the maxima from the first step have not been attained, the second step must be applied, without the sum of the two steps being able to exceed 13 weeks. * / Allen & Overy LLP 2014

23 23 EXCEPTION ONLY FOR WHITE-COLLAR EMPLOYEES? Although the wording of the LUS refers to all situations of termination of employment by the employee (ie whether by a white-collar or blue-collar employee), the maxima to which the LUS refers only apply to white-collar employees. It is consequently unclear whether the exceptions previously referred to only apply to white-collar employees, or whether they should also be applied to blue-collar employees and, if so, in what manner. According to the FPS ELSD, the exceptions only apply to white-collar employees. In view of the various ambiguities, it would be useful if the legislator would further clarify the application of the exceptions. Art. 69 LUS

24 24 The reform of dismissal rules in Belgium 2014 EXAMPLE 1 Performance of the employment agreement of a white-collar employee whose salary was not higher than 32,254 on 31 December 2013 commenced on 1 July The white-collar employee resigns during the course of September On 31 December 2013 the white-collar employee had accrued 9 years of service. If he were to have terminated his employment agreement on that date, he would have been entitled to 3 months notice, which corresponds to the maximum notice period for this category of white-collar employee in accordance with article 82, 2, third paragraph of the Law on Employment Agreements. The first part of his notice period consequently equals 3 months. Since the maximum notice period of 3 months for the employee has already been accrued by 31 December 2013, he does not have to add the notice period for the service accrued between 1 January 2014 and the moment of his resignation in September On his resignation in September 2016, the white-collar employee will have to serve a (single) notice period of 3 months. EXAMPLE 2 Performance of the employment agreement of a white-collar employee whose salary was higher than 32,254, but lower than 64,508 on 31 December 2013 commenced on 1 July The employee resigns in September This employee is a higher earning white-collar employee for whom the first part of the notice period is fixed. Consequently, the first part of his notice period, calculated in function of the employee s length of service on 31 December 2013, equals 1.5 months. As from 1 January 2014 a new period of service started running. As at the moment of his resignation in September 2016, the employee will be in his third year of service, counting from the introduction of the new dismissal rules. Based on the new rules regarding notice periods, the second part of his notice period equals 6 weeks. On his resignation in September 2016, the white-collar employee will have to observe a (total) notice period of 1.5 months plus 6 weeks. Allen & Overy LLP 2014

25 25 Agreement started < 1/1/2014 Resignation Basic rules Concerning service < 1/1/2014 Concerning service 1/1/2014 Employment agreement started < 1/1/2012 Terms as at 31/12/2013 (***) (*) Basic terms under unified status (see flowchart on page 8) (**) [BUT total maximum 13 weeks?] Blue-collar EE Employment agreement started 1/1/2012 IPA terms as at 31/12/2013 (****) (*) Basic terms under unified status (see flowchart on page 8) (**) [BUT total maximum 13 weeks?] Lower earning white-collar EE ( 32,254 on 31/12/2013) 1.5 months/commenced 5-year period of service, subject to a maximum of 3 months (*) Only if the limit of the first step (3 months) has not been reached: Basic terms under unified status (see flowchart on page 8 (**) BUT total of both = maximum 13 weeks [if limit of first step has not been reached] White-collar EE Higher earning white-collar EE (> 32,254 and 64,508 on 31/12/2013) 1.5 months/commenced 5-year period of service, subject to a maximum of 4.5 months (*) Only if the limit of the first step (4.5 months) has not been reached: Basic terms under unified status (see flowchart on page 8) (**) BUT total of both = maximum 13 weeks [if limit of first step has not been reached] Superior earning EE (> 64,508 on 31/12/2013) 1.5 months/commenced 5-year period of service, subject to a maximum of 6 months (*) Only if the limit of the first step (6 months) has not been reached: Basic terms under unified status (see flowchart on page 8) (**) BUT total of both = maximum 13 weeks [if limit of first step has not been reached] Specific reason Possible application of termination without compensation in the event of temporary unemployment (*) or a more beneficial regime (for EE) at the individual, company or sector level (**) or a more beneficial regime (for EE) at the individual or company level (***) art. 59 Law on Employment Agreements or deviation existing on 31/12/2013 (****) art. 65/2 Law on Employment Agreements or deviation existing on 31/12/2013

26 26 The reform of dismissal rules in Belgium Exceptional sectors APPLICATION OF EXCEPTIONAL REGIMES As an exception to the general rule of the 2-stepcalculation, there is an exceptional regime for blue-collar employees who work in the so-called Exceptional Sectors. The exceptional regimes described in section 3.2 apply to those blue-collar employees. As previously stated, the FPS ELSD is of the opinion that the application of this exceptional regime needs to be judged individually. Consequently, the regime is not necessarily applicable to all blue-collar employees working in the Exceptional Sectors (see section 3.2). STRUCTURAL EXCEPTION The 2-step-calculation does not apply to blue-collar employees falling under the structural exception. In those cases, the exceptional (shorter) periods referred to in section 3.2 apply, even if their employment agreement started before 1 January TEMPORARY EXCEPTION The exceptional (shorter) periods referred to in section 3.2 apply to those blue-collar employees falling under the temporary exception, even if their employment agreement started before 1 January 2014, if their notice is given between 1 January 2014 and 31 December If notice is given after 31 December 2017, their notice period needs to be determined according to the previously mentioned 2-step calculation. Art. 70 LUS 4.3 Special terms APPLICATION OF SPECIAL TERMS AFTER APPLICATION OF 2-STEP CALCULATION The special terms in the event of termination of employment with a view to retirement, SUC or during a period of temporary unemployment (as referred to in section 3.3), can also be applied to employees whose employment agreement started before 1 January For example, this means that the maximum period of 26 weeks in the event of termination with a view to retirement or the reduction to a minimum period of 26 weeks in the event of termination with a view to SUC, can apply to the result of the 2-step calculation. Art. 37/6, 37/11 and 37/7 Law on Employment Agreements Allen & Overy LLP 2014